Lululemon has conquered the market with its cult-favorite yoga pants. Now it’s getting into footwear.
At the company’s annual analyst day on Wednesday, CEO Calvin McDonald confirmed that the team has been developing an in-house shoe range that will build on the success of its collaboration with sneaker label APL (Athletic Propulsion Labs), which launched in August 2017.
“We tested, and we learned a lot on footwear, and what we learned is: The guest resonates with us selling footwear,” said McDonald. “We believe we’ve identified an opportunity that will be unique to us and unique within the marketplace.”
The news comes as somewhat of a surprise after analysts told FN that they didn’t expect the Vancouver, Canada-based brand to go after a category with such strong competition.
“I certainly think that Lululemon is strong enough and has brand equity with its core consumer to delve into footwear, but just because it can, I don’t think they necessarily will,” Canaccord Genuity analyst Camilo Lyon said recently. “Footwear is a tough business. It has lower margins, requires a new design skill set and would require a whole new partnership with a different manufacturer.”
It’s also a cutthroat field, with Nike and Adidas commanding a huge share of the market and upstart brands like Allbirds investing millions of dollars in marketing efforts to reach new consumers. Still, Lululemon has plenty of resources to invest in the category: For full-year 2018, the company recorded a 24% lift in revenues to $3.3 billion, putting it on track to meet its annual revenue goal of $4 billion before its 2020 target.
Lululemon has a dedicated customer base that is eager to snap up its $100-plus yoga pants without demanding discounts, a valuable asset at a time when many retailers have been hurt by excessive promotions.
What remains to be seen is how Lululemon will approach the category in a way that sets it apart from its competition: The company’s strengths lie in the intersection of fashion, fitness and lifestyle, so its shoes will likely also serve the athleisure-oriented customer, but it could also have success with the running and training segments, which are growth areas for the brand.
As part of its five-year growth plan, the company also said it wants to more than double the size of its men’s and online revenues by 2023, as well as quadruple international sales. The menswear push comes as Nike is doubling down on its women’s business, which currently makes up less than 25% of its overall sales.